Mumbai-based is acquiring around 51 per cent stake in Cipla Medpro South Africa Ltd, the company’s distribution partner in South Africa and a few other neighbouring markets, for around $220 million. Johannesburg Stock Exchange-listed Cipla Medpro’s chief executive Jerome Smith departed last month over alleged corporate governance lapses.
“The company is in preliminary discussion and has made an indicative proposal in relation to the acquisition of an approximately 51 per cent equity stake in Cipla Medpro, South Africa,” Cipla said in a statement on Wednesday.
YK Hamied-promoted Cipla has offered to buy shares at ZAR 8.55 a piece. Cipla Medpro scrip last traded at ZAR 7.69 a share and currently has a market cap of around $385 million with a PE ratio of 15.89.
The company has also appointed Subhanu Saxena as its new CEO. He comes with 25 years of experience across industries such as FMCG, consulting, banking and pharmaceuticals, and has also been with Novartis AG where he led the global product strategy and commercialisation function for three years.
Cipla Medpro offers a broad range of medicines and products, targeting a number of critical areas including cardiovascular and respiratory, diabetes, oncology, psychiatry, antimalarials and HIV/AIDS.
The group’s operations include two divisions. One is Cape Town-based Cipla Medpro which is into an extensive range of chronic medicines and OTC products. The other is Cipla Medpro Manufacturing, one of the first international PIC/S-compliant pharmaceutical manufacturing facilities in South Africa, based in Durban. It manufactures select lines of the group’s products and also offers contract manufacturing solutions to local and multinational companies.
The group is currently the third largest pharma company in South Africa and for the six months ended June 30, 2012, it clocked revenues of $121 million with around 12 per cent net profit margin. More than three-fourth of its business is derived from the single exit price (SEP) segment and includes scheduled products for both private and tender business while the OTC segment and other products comprise the rest of the revenues.
Mumbai-based Cipla has offered a price which values the firm at 15.4x its annualised net profit for 2012. This is close to a marginal premium to its current PE ratio. A deal will provide better control for Cipla over its distribution in the fast-growing emerging markets of the African continent besides boosting its own product range.
Besides its strong presence in the home market, Cipla Medpro also has products registered for markets like Botswana and Namibia.
For Cipla, this will be the first acquisition in more than two years. In 2010, it acquired stake in three companies – Meditab Specialities Pvt Ltd, Mab Pharm and a drug formulation facility in Sikkim.
Lately, overseas M&As by Indian pharma companies have gained pace with Sun Pharma announcing its plans to acquire NASDAQ-listed DUSA Pharma for $230 million and Dr Reddy’s Labs to acquire Netherlands-based OctoPlus for $36 million.
(Edited by Sanghamitra Mandal)